The Internal Revenue Service performs systemic line-by-line checks on numerous filed returns to ensure the information received is valid and consistent; at present, however, few such checks are performed on Forms 5500 and 5300.

Numerous projects in EP utilize the pension feature codes on Form 5500 and Form 5500-EZ line 8, and Form 5500-SF line 9 to identify a certain plan type meeting specific criteria of the project for audit and compliance check selections. What about those returns that do not list a pension feature code or have codes missing (i.e. a missing pension feature code “2J” on a 401(k) plan)? Missing or incorrect codes in the data create errors in the classification and selection processes and lead to a gap in coverage of the desired plan segments.

Project Process

We identified a population where the pension feature code(s) were missing, inconsistent or incomplete on Line 8a of the Form 5500, line 9a of the Form 5500-SF, and Form 5500-EZ line 8 for plan years ending in 2010. We will correspond with the sponsors of the identified plans and request that the sponsors tell us which pension feature codes apply to their plans by annotating the appropriate codes on a list included with our correspondence. The letter will inform plan sponsors how to amend their returns to include pension feature codes. Our primary goal is to correct and verify the pension feature codes on the selected returns, so that we have useful information. Additional goals are to identify the underlying causes for missing pension feature codes and to make recommendations to improve our systems.

If You Receive A Letter

Please provide a timely response to the information request. You may also furnish any other documents or clarifying material that you believe will be helpful for us to review. You should make every effort to be as complete and accurate as possible in your responses.

Review your 2010 Form 5500, 5500-SF or 5500-EZ select the correct codes for your plan, and respond to us as requested. When you are satisfied your codes are complete and correct, please file an amended return and complete the applicable line with the appropriate pension feature codes for your plan as soon as possible. Our letter contains brief filing information and sources of additional information you may need. You should file your amended return with the Department of Labor (Forms 5500 or 5500-SF) or the IRS Service Center (Form 5500-EZ).

This letter initiates a compliance check. We will not inspect your books and records to determine a filing liability for a particular tax period. Failure to respond may not, of itself, be the cause for an audit.

If You Have Questions

Please feel free to email us and we will be glad to answer any questions you have about the project and how it relates to you. Please include “Pension Feature Codes” in the Subject line of the message. We regret that we cannot answer technical questions unrelated to your compliance check.